Mr. Jeff Puritt reports

TELUS INTERNATIONAL REPORTS FOURTH QUARTER AND FULL-YEAR 2023 RESULTS, DELIVERING SOLID REVENUE GROWTH, WITH RESILIENT PROFITABILITY AND CASH FLOW; PROVIDES OUTLOOK FOR 2024

Telus International (Cda) Inc. has released its results for the fourth quarter and full-year ended Dec. 31, 2023. Telus Corp. is the controlling shareholder of Telus International. All figures in this news release, and elsewhere in Telus International disclosures, are in U.S. dollars, unless specified otherwise, and relate only to Telus International results and measures.

"At the close of 2023, our management team at Telus International reflected on a challenging year across our industry and the impact it had on our long-term track record of consistently delivering on expectations. Whilst we took meaningful action to improve performance and our results in the second half of the year started to show signs of stabilization, with significantly improved profitability, our industry is not yet back to a normal operating rhythm, as macroeconomic uncertainty remains and our clients proceed cautiously," said Jeff Puritt, president and chief executive officer of Telus International. "In addition to streamlining our operations to match near-term client demand and improving efficiencies at all levels of our company, we've also made further progress with the integration of WillowTree and our digital solutions services to ensure Telus International is well positioned to combine our scaled design and build capabilities along with our technology-led operations and managed services across all of our service lines, going to market as an AI-fuelled customer experience partner of choice."

Mr. Puritt continued: "In the fourth quarter, our global sales team won new business with a North American customer engagement software and analytics company, Western Canada's premier heavy-duty truck and bus dealership, and a German research institution focused on innovative visual systems, to name a few. We continued to broaden relationships with our existing clients, such as Google, driven by AI-related momentum, and a Canadian multinational banking and financial services corporation. Our parent company and anchor client, Telus Corp., remains a unique long-term tailwind for our business, as demonstrated in 2023 through expanded project mandates, including with Telus's health business unit, which continued to ramp in the fourth quarter."

Mr. Puritt added: "Illuminating our commitment to create value through technology to delight customers with exceptional experiences, in the fourth quarter, Telus International was recognized as a leader in the IDC MarketScape, Worldwide Data Labeling Software 2023 Vendor Assessment, on the merits of our data labelling software technologies and capabilities. Additionally, in their recent industry report, the IDC featured Telus International's Fuel iX solution, and specifically our GenAI Jumpstart eight-week accelerator program, among the examples of successful implementation of generative AI in customer care business process services. In another accolade, Five9, the partner we chose for our intelligent, cloud-native contact-centre-as-a-service (CCaaS) application platform, recognized Telus International as the Canadian Partner of the Year and the Global Partner of the Year in 2023, as we work together to reimagine customer experience in the cloud, with agile and scalable solutions like Fuel iX that harness the power of generative AI to deliver end-to-end CX and innovation, while driving better performance and cost efficiencies for our clients."

Vanessa Kanu, chief financial officer, said: "In the fourth quarter of 2023, Telus International delivered solid revenue growth amidst a challenging operating environment, aided by the continued momentum we are seeing in AI data solutions as well as expanded mandates with Telus Corp. Importantly, we also exited 2023 with a meaningful improvement in our profitability, driven by our cost efficiency efforts that allowed us to deliver on our commitment to bring margins back to the prior levels we have grown accustomed to."

Ms. Kanu continued: "In setting our outlook for 2024, we remain conscious of the prolonged decision-making cycles we are seeing from both existing and new clients. Our current view of client demand assumes a continuation of the industry-wide challenging business climate for roughly the first half of the year, while we are hopeful to start seeing broader demand recovery in the latter half of 2024."

Ms. Kanu concluded: "Telus International's balance sheet remains solid, with the business demonstrating its ongoing ability to generate meaningful cash flow that we have used to lower our debt levels, resulting in a further improved leverage position. Our capital allocation priorities remain focused on enabling long-term growth by also reinvesting into our business, through technology and innovation, which we believe will support our long-term success. Meaningful growth opportunities for our business over the long term continue to support our conviction in the strong investment thesis around Telus International, driven by digital transformation, differentiated premium CX offerings, digital trust and safety, all underpinned by agile and scalable AI capabilities."

Provided below are financial and operating highlights that include certain non-GAAP (generally accepted accounting principles) financial measures and ratios. Note that beginning in the first quarter of 2024 and in connection with its full-year outlook for 2024 presented further below under "outlook," the company will no longer exclude share-based compensation expense and changes in business combination-related provisions, and the tax effects of these items, as applicable, in its presentation of adjusted net income, adjusted basic and diluted EPS (earnings per share), and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).

Q4 2023 versus Q4 2022 summary:

• Revenue of $692-million, up $62-million, an increase of 10 per cent year-over-year on a reported basis and 9 per cent on a constant currency basis, of which $41-million was from WillowTree. Excluding WillowTree, the company's revenue was $651-million, an increase of $21-million, or 3 per cent, reflecting growth in services provided to existing large clients, including Telus and Google, offsetting lower revenues from one of Telus International's largest clients, a leading social media company. Revenue growth included a favourable foreign currency impact of approximately 1 per cent, associated with the weakening U.S.-dollar exchange rate against the euro.
• Net income of $38-million and diluted EPS of 10 cents, compared with $34-million and 13 cents, respectively, in the same quarter of the prior year, with revenue growth outpacing the increase in operating expenses, while higher interest expense and income taxes were offset by impacts from changes in business combination-related provisions related to the revaluation of the provisions for written put options arising from Telus International's acquisition of WillowTree. Net income margin, calculated by dividing net income by revenue for the period, was 5.5 per cent, up from 5.4 per cent for the same quarter in the prior year. The decrease in diluted EPS was due to a higher count of weighted average diluted shares outstanding, which incorporated a potential dilutive effect of Telus International's provisions for written put options referenced above. Net income and diluted EPS include the impact of changes in business combination-related provisions, share-based compensation, acquisition and integration charges, and amortization of purchased intangible assets, among other items. Adjusted net income, which excludes the impact of such items, was $72-million in the fourth quarter of 2023, compared with $95-million in the same quarter of the prior year, with higher operating expenses, interest expense and tax expense outpacing revenue growth.
• Adjusted EBITDA was $164-million, an increase of 4 per cent from $157-million in the same quarter of the prior year, driven by the favourable impact of cost efficiency efforts from earlier in the year and increased volumes in artificial intelligence data solutions, namely with Google, and digital enablement of Telus. This helped offset reductions in service demand, principally in Europe, wage inflation and accelerated ramp-up costs in the quarter for certain clients. Adjusted EBITDA margin was 23.7 per cent compared with 24.9 per cent in the same quarter of the prior year. Adjusted diluted EPS was 26 cents, compared with 35 cents in the same quarter of the prior year.
• Cash provided by operating activities was $142-million and free cash flow was $115-million, with a year-over-year growth of 69 per cent and 92 per cent, respectively, due to lower income tax payments and higher net inflows from working capital in the quarter.
• Net debt to adjusted EBITDA leverage ratio as per credit agreement of 2.8 times as of Dec. 31, 2023, an improvement from 2.9 times as of Sept. 30, 2023, and remaining within our target steady-state range of two to three times.
• Team member count was 75,347 as of Dec. 31, 2023, an increase of 3 per cent year-over-year. On a quarter-over-quarter basis, the team member count also increased 3 per cent, reflecting project onboarding and training, which offset team member reductions in the fourth quarter as part of cost savings efforts in 2023 to right-size staffing with near-term client demand volumes, particularly in Europe.

2023 versus 2022 summary:

• Revenue of $2,708-million, up $240-million, an increase of 10 per cent year-over-year on a reported basis and 9 per cent on a constant currency basis, of which $186-million was from WillowTree. Excluding WillowTree, Telus International's revenue was $2,522-million, an increase of $54-million, or 2 per cent. The increase was due to growth in services provided to existing clients, including Telus and Google, as well as new clients, partially offset by lower revenues from one of the company's largest clients, a leading social media company, as well as a global financial institution client. Revenue growth included a favourable foreign currency impact of less than 1 per cent, associated with the weakening U.S.-dollar exchange rate against the euro.
• Net income of $54-million and diluted EPS of 18 cents, compared with $183-million and $0.68, respectively, in the prior year. Net income margin was 2 per cent, compared with 7.4 per cent in the prior year. Adjusted net income, as defined above, was $252-million, compared with $332-million in the prior year, primarily due the increase in operating expenses and interest expense outpacing revenue growth, which were partially offset by lower income taxes.
• Adjusted EBITDA was $583-million, compared with $607-million in the prior year, primarily due to the increase in salaries and benefits outpacing revenue growth, resulting from lower utilization of team members in certain regions, and changes in Telus International's revenue mix. Adjusted EBITDA margin was 21.5 per cent, compared with 24.6 per cent in the prior year, impacted by cost imbalances arising from reductions in service demand, principally in Europe, and from some of the company's larger technology clients, which were partially offset by cost efficiency efforts initiated in the second quarter of 2023 and realized during the year. Adjusted diluted EPS was 91 cents, compared with $1.23 in the prior year.
• Cash provided by operating activities was $498-million and free cash flow was $405-million, with a year-over-year growth of 14 per cent and 22 per cent, respectively, primarily due to higher net inflows from working capital, which included higher cash receipts from Telus, and lower income tax and share-based compensation payments. These increases were partially offset by lower operating profits and cash expenditures for transaction costs associated with Telus International's acquisition of WillowTree.

A discussion of the company's results of operations is included in its 2023 management's discussion and analysis dated Feb. 9, 2024, and filed on SEDAR+ and Item 5: Operating and Financial Review and Prospects in its annual report on Form 20-F, dated Feb. 9, 2024, and filed on EDGAR. Such materials and additional information are also provided on Telus International's website.

Outlook

As described above, beginning in the first quarter of 2024, Telus International's will no longer exclude share-based compensation expense and changes in business combination-related provisions, and the tax effects of these items, as applicable, in its presentation of adjusted net income, adjusted basic and diluted EPS, and adjusted EBITDA. The company believes this presentation is more indicative of underlying business performance, and better aligns the presentation of these non-GAAP financial measures and ratios with comparable measures and ratios of Telus, Telus International's parent company.

Management has released the following full-year outlook ranges for 2024 (adjusted EBITDA and adjusted diluted EPS are calculated under the modified presentation described above):

• Revenue in the range of $2,790-million to $2,850-million, representing growth of 3 per cent to 5 per cent;
• Adjusted EBITDA in the range of $623-million to $643-million, representing growth of 7 per cent to 10 per cent;
• Adjusted EBITDA margin in the range of 22.3 per cent to 22.6 per cent;
• Adjusted diluted EPS in the range of 93 cents to 98 cents, representing growth of 7 per cent to 13 per cent.

Telus International announces transition of chief financial officer and appointment of successor

Telus International chief financial officer (CFO) Ms. Kanu has decided to leave the company, effective March 31, 2024. Ms. Kanu has held the role since September, 2020, and during that period of time was a pivotal member of the leadership team through a period of global expansion and growth, guiding Telus International's strategic acquisitions, supporting the company's expansion into Africa and most notably providing financial leadership through the company's initial public offering in February, 2021. Ms. Kanu quickly and adeptly built a strong foundation for Telus International as a public issuer, and will remain at the company until the end of March to ensure an orderly transition to her successor, Gopi Chande, FCPA, FCA, senior vice-president (SVP), finance, and treasurer at Telus, who will assume the role of CFO at Telus International on March 4, 2024.

Over the past 14 years, Ms. Chande has proven herself a trusted leader, adviser and advocate at Telus. In her most recent role as senior vice-president and treasurer, she successfully managed a comprehensive portfolio covering treasury, corporate development, investor relations, pensions and sustainability. During her tenure, Ms. Chande has overseen substantial financial initiatives, including over $2-billion in bond raises, $1-billion in merger and acquisition transactions, and the evolution of a pioneering sustainable finance framework. Throughout her career, Ms. Chande has excelled in driving growth, diversification and transformation, and has guided Telus through strategic financial decisions, such as the formative rollout of its multibillion-dollar Telus PureFibre network, as well as the transformation of the company's end-to-end customer solutions through the growth of the Telus Digital platform. Ms. Chande also brings a strong understanding and wealth of experience in international business to Telus International. Prior to Telus, Ms. Chande developed 10 years experience with KPMG, working in Vancouver, Budapest and the Silicon Valley, and was the controller at multinational tech start-up E2open for two years. Ms. Chande is a board member of the Telecommunication Workers Pension Plan, Concert Properties and the BC Women's Health Foundation. Ms. Chande earned her CPA, CA (certified public accountant, chartered accountant) designation with gold medal distinction, and recently was elected to fellowship (FCPA). She also holds a CPA (Illinois) designation.

"I look forward to welcoming Gopi to my leadership team. Her transparent and personable approach has fostered a highly engaged team, and her adept financial acumen has led her to build strong connections with the Telus executive leadership team, board of directors and investment community," said Mr. Puritt. "Gopi brings a wealth of experience to Telus International as we continue to drive growth and diversification, and we expect a smooth transition to ensure our team and company's continued focus on profitable growth and industry-leading free cash flow yield in 2024 and beyond."

The organizational change announced today reflects the implementation of a robust, collaborative and continuing succession planning program between Telus International and Telus for their executive leadership teams and finance organizations.

"On behalf of the board of directors, I would like to sincerely thank Vanessa for her many, many contributions to our company, including her strong and capable guidance through our IPO journey, her learned counsel as we navigated a global pandemic and other challenging macroeconomic conditions, and her unwavering dedication to our team members throughout her tenure; we wish her well in her future endeavours and she will be missed here at Telus International," concluded Mr. Puritt.

Q4 2023 investor call

Telus International will host a conference call today, Feb. 9, 2024, at 10:30 a.m. (ET)/7:30 a.m. (PT), where management will review the fourth quarter and full-year results, followed by a question-and-answer session with prequalified analysts. A webcast of the conference call will be streamed live on the Telus International investor relations website and a replay will also be available on the website following the conference call.

About Telus International (Cda) Inc.

Telus International designs, builds and delivers next-generation digital solutions to enhance the customer experience (CX) for global and disruptive brands. The company's services support the full life cycle of its clients' digital transformation journeys, enabling them to more quickly embrace next-generation digital technologies to deliver better business outcomes. Telus International's integrated solutions span digital strategy, innovation, consulting and design, information technology life cycle ,including managed solutions, intelligent automation and end-to-end AI data solutions, including computer vision capabilities, as well as omnichannel CX and trust and safety solutions, including content moderation. Fuelling all stages of company growth, Telus International partners with brands across strategic industry verticals, including tech and games, communications and media, e-commerce and fintech, banking, financial services and insurance, health care, and others.

Telus International's unique caring culture promotes diversity and inclusivity through its policies, team member resource groups and workshops, and equal employment opportunity hiring practices across the regions where it operates. Since 2007, the company has positively impacted the lives of more than 1.2 million citizens around the world, building stronger communities and helping those in need through large-scale volunteer events and charitable giving. Five Telus International community boards have provided $5.6-million in financing to grassroots charitable organizations since 2011.

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